The season premiere of AMC's Breaking Bad drew 5.9 million viewers in
the United States on Sunday night, double the figure for its premiere a
year ago. That kind of audience growth is rare, and it's even less
common for such a dark drama, chronicling the transformation of a
chemistry teacher into a ruthless methamphetamine kingpin.

But
while ratings are worth celebrating, they aren't the best measure of
success by the weird economics of the television industry. In fact, AMC
had prevailed well before Sunday night's Breaking Bad premiere, and it did so while violating many of the outdated assumptions that tend to govern cable TV.

AMC
makes most of its money not from advertising but distribution -- what it
charges cable companies for the right to carry its content. These
affiliate fees, sometimes called retransmission fees, are a strong
indicator of a network's worth: The more valued it is by cable
customers, the more money it can extract from cable companies. And by
that measure, AMC is doing very well, indeed.

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The backstory to that chart goes something like this:
AMC had been a movie channel -- it stood for American Movie Classics -- but
toward the beginning of last decade, executives worried the network was
becoming expendable. Cable companies could provide their own movies more
conveniently and for less money.

But
Time Warner's HBO, another network with its legacy as a movie channel
embedded in its name, had successfully invested in original programming
that made it hard to get rid of. In 2007, The Sopranos aired its final episode on HBO, having changed a lot of assumptions about television in the process. "We need a Sopranos," was the mantra within AMC.

That year, AMC debuted Mad Men, a drama about an advertising agency in the 1960s. The original script, by a Sopranos writer,
had languished for nearly a decade without finding anyone willing to
produce it, but risky shows suddenly seemed like better bets. "My boss
has told me that ratings, in that moment, don't matter," recalled Rob Sorcher, an executive who was brought in to turn around the network.

What AMC got from Mad Men was
a different kind of hit, the type that tends to be called "critically
acclaimed," a show that some people would be passionate about--and
complain loudly if their cable company ever dared to pull it off the
air.

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Mad Men was followed a year later by Breaking Bad. Its lead, Bryan Cranston, won the Emmy for best actor after the first season. "Now we're a network," Charlie Collier, the president of AMC Networks, remembered saying when Cranston won. "We have two shows." Popular shows that followed included The Walking Dead and The Killing, which attracted better ratings and additional cult followings.

That
provided enough leverage for AMC to demand that cable companies pay
higher affiliate fees, which rose from 22 cents per customer per month
in 2007 to 33 cents in 2013--a 50% jump in five years, according to
estimates by SNL Kagan. (That's just for
AMC itself; AMC Networks also includes IFC, WE tv, and the Sundance
Channel, which command lower rates.) When Dish Network balked at paying higher fees last year, AMC ultimately won the dispute.

Look
at where AMC Networks's revenue has been coming from lately.
Advertising is strong, up 13.7% in the second quarter from a year
earlier after faltering in the early years of AMC's transition. (Mad Men, ironically, did not bring in lots of ad dollars in its first few seasons; zombie drama The Walking Dead proved to be a better sell.) Meanwhile, revenue from domestic distribution -- that is, affiliate fees -- is even stronger, up 17.5%.

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Shares of AMC Networks are up 93% since
the company, previously owned by Cablevision, went public in the middle
of 2011. Its turnaround is all the more notable because it has bucked a
lot of industry norms in the process.

AMC
is more progressive than nearly any other cable network (other than
HBO, which is in a whole other class) in distributing shows over the
internet. New episodes of its most valuable programming, including this
final season of Breaking Bad, can be purchased on Apple's
iTunes and Amazon's Instant Video a few hours after their initial airing
on US television. Most cable programming isn't similarly available, out
of fear that people won't see a need to pay for cable TV subscriptions.

AMC's
policy has rattled cable companies, but the network persists. It struck
a deal with Netflix to stream all previous episodes of Breaking Bad, a strategy that, by the industry's traditional thinking, could have discouraged live viewing of the new episodes. Instead, the opposite seems to have occurred,
with summer binge-watching of earlier seasons preparing a much larger
audience for the final eight episodes on live television.

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Pressing still further, AMC is giving new Breaking Bad episodes to Netflix viewers in the United Kingdom right
after they air in the US, instead of the weeks-to-months delay that is
typical for exporting top-flight US shows. The partnership could point
to other ways for AMC to distribute its programming a la carte rather
than in cable bundles, especially outside the US, where it is less
constrained.

That posture is aggressive but prudent at a moment when at least three technology companies -- Intel, Google, and Apple -- are
known to be negotiating with content companies like AMC in the hopes of
providing television services that could cut out cable companies in
whole or part. The question now seems not to be whether such a vision
will come to pass, but how quickly. And it wouldn't be surprising if AMC
were more willing to make that leap than some of its rivals,
transforming yet again, this time from a cable network to -- who knows what
to call it?

"If
you don't know who I am," Cranston's character Walter White advises an
adversary at the end of Sunday's premiere, "then maybe your best course
would be to tread lightly."